Nov. 9 (Bloomberg) -- China’s factory output and retail
sales exceeded forecasts and inflation unexpectedly cooled to
the slowest pace in 33 months, signaling the government is
boosting growth without driving a rebound in prices.

Industrial production rose 9.6 percent in October from a
year earlier, the National Bureau of Statistics said today in
Beijing. That exceeded the 9.4 percent median estimate of
analysts surveyed by Bloomberg News. Retail sales growth of 14.5
percent picked up from September’s 14.2 percent. The consumer-price index increased 1.7 percent.

Today’s reports may offer some comfort to China’s leaders
who are meeting in Beijing this week for a once-a-decade power
transition and pledged yesterday to double per-capita income in
the 10 years through 2020. The pause in monetary easing since
July may persist as data increasingly show the economy
recovering from a seven-quarter slowdown.

“The key question for investors is whether China’s
economic growth has truly bottomed and is recovering,” and the
“answer is firmly yes,” said Lu Ting, chief Greater China
economist at Bank of America Corp. in Hong Kong.

Government spending may be playing a key role in the pickup.
Fixed-asset investment excluding rural areas increased 20.7
percent in the first 10 months of 2012 from a year earlier,
compared with the 20.6 percent median analyst estimate and a
20.5 percent pace in the January-September period.

Central Government

Spending on central government-invested projects rose 5.1
percent in the 10-month period from a year earlier, more than
double the January-September pace, the data show.

The yuan was little changed against the dollar in Shanghai
today. The benchmark Shanghai Composite Index of stocks fell for
a fifth day, dropping 0.1 percent.

The increase in China’s gross domestic product slowed to
7.4 percent in the July-September period from a year earlier,
the weakest in three years. Expansion will probably speed up to
7.7 percent this quarter and to 7.9 percent in the three months
through March 2013, based on the median estimate of analysts
surveyed Oct. 18-22.

The increase in industrial output was the most in five
months and compared with 9.2 percent in September. Retail sales
growth was the highest since March.

The CPI increase was below the 1.9 percent median estimate
of analysts surveyed by Bloomberg News and compared with 1.9
percent in September. Producer prices declined 2.8 percent from
a year earlier after a 3.6 percent drop in September.

‘Comfortably Low’

“Inflation remained comfortably low, but, given more signs
of growth recovery, the PBOC will probably stay on the
sideline,” said Yao Wei, China economist at Societe Generale SA
in Hong Kong, one of two analysts to accurately predict the CPI
reading.

China’s consumer-price gains have slowed from a three-year
high of 6.5 percent in July last year as food costs eased.

Food prices rose 1.8 percent last month from a year earlier,
compared with a 2.5 percent gain in September, according to the
statistics bureau. Pork, a Chinese staple, dropped 15.8 percent
from a year earlier, subtracting 0.6 percentage point from the
CPI, compared with a 38.9 percent rise in October 2011.

Zhongpin Inc., a Nasdaq-listed processor of meat for
restaurants and stores in China, said yesterday that third-quarter net income dropped 40 percent as the price of pork fell
and costs to support expansion rose, according to a statement
from the Changge, Henan province-based company.

Stable Inflation

Inflation is “currently stable,” the central bank said in
its quarterly monetary policy report last week. At the same time,
it highlighted risks from increases in costs of imported goods
and said prices are sensitive to expansion in demand and
stimulus policies.

The decline in the producer-price index compared with the
median estimate for a 2.7 percent drop in a Bloomberg survey of
economists. The reading marked the first improvement since
prices started falling on a year-earlier basis in March as
domestic demand slowed, with the government’s campaign to rein
in inflation and property prices and excessive inventories
plaguing industries including steel and cement.

Elsewhere in the Asia-Pacific region, the Reserve Bank of
Australia reduced its 2013 growth forecast as lower investment
and the government’s pledge to deliver a budget surplus restrain
the economy. The Bank of Korea kept interest rates unchanged as
projected by all economists surveyed by Bloomberg. Malaysia’s
exports unexpectedly rose in the first gain in three months in
September.

French Factories

French industrial production fell more than estimated in
September, while Russia’s central bank refrained from increasing
borrowing costs after inflation unexpectedly slowed in October
for the first time in six months.

In the U.S., the Thomson Reuters/University of Michigan
preliminary November consumer sentiment index probably climbed
to the highest since 2007, while the Commerce Department may say
inventories at wholesalers rose at a slower pace in September.

In China, shrinking stockpiles of some products are setting
the stage for replenishment to support an economic rebound and
price gains. Stocks of manufacturers’ finished goods contracted
in October for a fourth month at close to the fastest pace this
year, according to a government purchasing managers’ survey. One
measure of coal inventories shows a 40 percent drop since this
year’s peak in June and a gauge of steel stockpiles is the
lowest since 2009.

“We believe macro data will remain strong” through the
rest of the fourth quarter, Zhang Zhiwei, chief China economist
at Nomura Holdings Inc. in Hong Kong, said in a note.